Track Your Spending for A Week, Then A Month, Then A Quarter

Tracking your spending is the first step to understanding where your money goes. You can't make substantial changes to your financial life until you understand what your financial life looks like right now.

What's stopping you from getting out of debt? From saving for a home, college education, retirement or a fantastic vacation?

Many people are waiting for a windfall:

"As soon as I hit the Lotto, I am going to take care of everything!"

"When I get my bonus, I am going to take care of everything!"

"When I get a higher paying job, I am going to save like I should!"

"When my great aunt kicks the bucket, she'll leave me everything and then I can get it together!"

Ok, maybe you're not waiting for a relative to die, but you're probably waiting for more money. If you had more money, then you could pay down debt or save or do both.

You have more money than you think.

You've heard and read about the "latte factor," how you're 4x-a-day Starbucks habit is robbing you of hundreds of dollars a year. Well, how about your "vending machine factor," or your "overpriced auto insurance factor," or your "club hopping factor?" What small things are you dropping money on over and over that you never notice until it's time to pay a bill?

One of the first steps to getting a true picture of your fiscal health is determining just what you spend your hard-earned money on.

To do this right, you have to do it the hard way -- keep all your receipts and write every expenditure down.

"WHY?!" You may be shrieking. "I don't have the time or patience to keep track of all those little pieces of paper. What's the benefit?" The benefit is that you may discover hundreds of dollars you are losing each month and don't even realize it.

For One Week, keep the receipts for every purchase you make. If you don't get a receipt, immediately write down what you bought, the date and how much it cost (I use an app on my smart phone called Cashbox). If you use debit or credit cards, write it down anyway. Use the statements to double-check your notes.

At the end of the week, open a spreadsheet (yes, that little green X thing on your computer -- it's called Excel). In Column A, type in the dates you made your purchases. In Column B, type where you went shopping. Column C, type in what you bought (groceries, cosmetics, bank fee is sufficient; don't catalog every item). Finally, in Column D, type in how much it cost.

When you're done, add up Column D. Take the sum of Column D and multiple it by 4.

That new number shows you what you spend each month, not including your bills or your debt. Just on stuff.

Now, subtract this number from your monthly take-home pay. If this number is negative, you're going into debt every month.

You may be thinking, "I just had an off week." Maybe you did. Now that you know you have the discipline to do this for one week, do it again for two. Then do it for a month. Do it for a quarter (that's three months).

Look for patterns. Is latte listed 80 times? Did you go to the grocery store repeatedly? Did you stick a lot of change into a vending machine?

This will give you a more accurate picture of what you do monthly. It will help you plan for your money.

In the coming posts I will explain how to take that information to begin transforming your financial situation. One step at a time to financial freedom!